O2 ditches mobile wallet

O2 has told customers it will end support for its digital wallet just 18 months after launch.

Matthew Finnegan is the former editor of Computerworld UK. He joined IDG in January 2013, having spent two years writing for various online tech publications. He still covers enterprise technology over at Computerworld in the USA.

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O2 has told customers it will end support for its digital wallet just 18 months after launch.

The mobile operator, owned by Telefónica, announced in a post on its website that it will cease the O2 Wallet service as of 31 March 2013.

“When we launched the O2 Wallet 18 months ago we were one of the first mobile wallets around. Since then lots has changed for us, the market and our customers," a statement read.

“So, we've decided to close the O2 Wallet to give us time to look into new and better ways to help people manage their money on the move, both in the UK and abroad.”

The digital wallet, launched in 2012, enabled subscribers to make payments of up to £500 to other users of the smartphone app. The prepaid system, open to customers of any mobile operator, also supported transaction with a number of online retailers.

Subscribers are now being told to use funds remaining in digital wallets before the deadline, or balances will returned to bank accounts or via cheque.

The decision to end the O2 service was down to changes within the “financial services sector and also within Telefónica”, the company said.

For example, O2 last year announced a venture with rival operators EE and Vodafone to jointly develop a new m-commerce platform, Weve. Telefónica also announced a multi-year deal with software provider Monitise to develop “a global technology platform to support payment and mobile commerce services".

A spokesperson confirmed that the company will now be “re-investing in other m-commerce opportunities” across the organisation.

Telefónica declined to provide user figures for the platform, and did not comment on whether slow uptake was a contributing factor in the decision to end support wallet.

The digital payments marketplace has since become more crowded, with a number of mobile payment services either already on the market, or preparing to launch, such as the Vocalink-backed Zapp platform.

But while the use of mobile payments is set to increase this year, Peter Roe, financial services analyst at TechMarketView, said that other mobile operators entering the market will struggle to gain a foothold as more traditional players, such as banks, begin to offer their own services.

“We have been rather sceptical of the efforts of mobile operators to build a successful mobile payments business in developed economies where competition is fierce and the fact that O2 are withdrawing this service without announcing an immediate replacement reinforces this view,” he said.

He added that it is likely that Telefonica will return with new mobile wallet and m-commerce offerings this year based on its partnership with Monitise, but will come up against even more opposition from a range of competitors.

“Over the next 12 months we can expect a host of new mobile payments and m-commerce services from an array of vendors as smartphone penetration grows and as financial services companies and retailers use the mobile channel to offer more personalised services," he said.

“Usage levels are certain to increase but we should also expect that a large proportion of these offerings will 'crash and burn' as companies compete for the valuable real estate that is your smartphone’s screen.”